The Co-operative Bank has announced that it is using Funding for Lending capital to expand mortgage lending to first time buyers.
The Co-op’s market-leading two-year fixed mortgage deal at 3.99% is available to people with 90% LTV and has no arrangement fees. The bank has pledged to lend £360m to first-time buyers in 2012.
It says it has chosen to use cheap finance they are getting through the Bank of England’s Funding for Lending scheme to boost first time buyer lending, rather than to only lend to low risk borrowers.
The Bank of England has been providing cheap loans to lenders through the scheme since August in exchange for increased lending to homeowners and businesses.
Worried borrowers struggling to get mortgages
Which? has welcomed the Co-op’s announcement and wants to see more lenders offering competitive rates to first time buyers.Over half of people under 30 are concerned about their ability to get on the property ladder according to the Which? Quarterly Consumer report. The report also highlighted the problem that ‘mortgage prisoners’ face. Many people are stuck on expensive deals and unable to move onto cheaper mortgages due to tighter lending criteria or falling house prices. Which? wants to see more done by lenders and the government to help this group, as well as first time buyers.
Which? executive director Richard Lloyd said: ‘We have been calling on lenders to use the Funding for Lending Scheme to help first-time buyers and mortgage prisoners so today’s news that The Co-operative Bank is to pass on this cheap finance to those struggling to get on the housing ladder is welcome.
‘We want to see more banks follow their lead and pass on lower borrowing costs to all borrowers, not just those with bigger deposits or equity in their homes.’
Which? wants Funding for Lending to deliver more
Which? is calling for:
- The Government to put in place clearer rules for the Funding for Lending Scheme to ensure that banks and building societies pass on this cheap finance to mortgage prisoners and first time buyers
- The Government to publish its expectations for the scheme, and what safeguards are put in place to ensure that banks pass on cheap funding to consumers
- Greater transparency from the banks, who should publish details of their mortgage lending using the Funding for Lending Scheme
- Banks to stop increasing arrangement fees, which have risen by around 60% in the past eighteen months to an average of £1,472 in August 2012, to bring down the costs for people to switch to another mortgage deal.
We believe you should seek independent mortgage advice before taking out a mortgage. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.